Financial Planning For Retirement. | Advisor World

1. Financial Planning For Retirement Retirement planning is an essential part of a sound financial plan, especially at a younger age. When you begin preparing for your future earlier, there is sufficient time to tackle any unprecedented challenges and live comfortably in the meantime. Many reasons add up to the importance of Financial Planning For Retirement in life. First, let us understand what is retirement planning to have a better idea of the necessary steps to take. What is Retirement Planning? Retirement planning is a process of setting retirement income goals and taking all the possible actions and making decisions, which are essential to achieve those retirement goals. Retirement planning includes evaluating sources of income, estimating expenses, and setting up an investment plan or savings plan to achieve the retirement goals by managing the risks and assets. When you start earning, retirement planning is not an immediate concern. It may be reasonably easy to put it off till a later time in life. Nonetheless, you must remember that it is always in your best interest to be prepared. There may be many life events that are out of control, but the least you can do is prepare for them in financial terms. The same is true for retirement planning.

2. Each of us has an idea of what our life will look like after retirement. No matter what it is, it requires ample financial support to maintain your standard of life. Retirement planning simply means setting income goals for post-retirement life and determining the steps necessary to achieve them. A significant part of retirement planning is identifying income sources, evaluating expenses, investing in savings programs, and managing the risks. To put it plainly, retirement planning means devising financial strategies that will help you save, spend, and invest according to your long-term goals in the later age. There are many financial instruments available that aid in retirement planning, depending on the individual’s profile. Importance of Retirement Planning When you have a steady income source, most problems in life become easier to solve. A financial burden can lead to several harmful consequences, including health issues that will only add to your worries. When you have an adequate understanding of what is retirement planning and how it affects your life, you are better equipped to deal with post-retirement challenges. While you can begin retirement planning at any point in life, it may be more convenient to do it early. Depending on when you start your retirement planning, your goals may also change. The pace of life today makes it challenging to pause and reflect on the long-term plans at the right time. Reasons to Plan for Your Retirement Financial security makes most things in life more convenient. Retirement planning provides that surety of being secure in monetary terms throughout life, regardless of employment. Let’s discuss the multitude of such reasons that make retirement planning essential for life. 1. Independence Most people worry about being a burden to their family in their old age. It can also be emotionally distressing to be dependent on someone else for your expenses. Retirement planning allows you to maintain a good lifestyle without depending on family members. Some people think of retirement as a time for achieving goals that were ignored due to more pressing needs in life. If you put in time and effort into retirement planning, such dreams can come true with ease. 2. Life Expectancy You may not realize it now, but life after retirement is considerably long. For example, if someone retires at the age of 60, the average life expectancy of 70-75 years gives them many years to manage their post-retirement fund. This is what makes retirement planning at the right age more crucial. 3. Medical Costs With each passing day, the cost of medical treatment is reaching new heights. A medical emergency can burn a massive hole in one’s savings. Furthermore, people are more susceptible to illnesses at an older

3. age. Retirement planning is of immense importance to meet such expenses and receive quality medical care at a time of need. 4. Tax Relief Each earning individual wishes to reduce their tax liability and maximize their savings. The government of India allows certain tax benefits on several financial instruments, which you can include in your retirement planning agenda. It is an effective way to plan for your future and save money in the present simultaneously. Tax benefits are as prevailing tax laws subject to change. 5. Peace of Mind Your peace of mind is invaluable. The stress of managing money to meet your long-term and short-term expenses can be dreadful. It may even cause health-related issues such as hypertension and other unfortunate illnesses. It is more important to shield yourself from such problems at an older age. Retirement planning is an effective method of ensuring a happy and healthy life for a long time. When Should You Start with Retirement Planning? There is no perfect time to start with retirement planning. At different stages in life, your financial profile may look different. However, it is advisable to begin retirement planning in the early years of life. It helps spread the investments over an extended period, thereby reducing the burden on your regular income. Typically, retirement planning includes three phases of investment, accumulation, and withdrawal. The first phase should start at the age of 30-50 when you can afford to save or invest a fair amount. It is essential to understand your risk-taking ability in terms of age, income source, and more considerable expenses such as a child’s education, loans, and marriage. When you are nearer to retirement, the focus should be on availing of the benefits from the assets acquired over time. You can enjoy them in the form of a monthly income or a lump-sum amount on retirement.